The Russian economy has undergone monumental changes since the collapse of Communism. After a nearly decade-long decline, caused by the breakup of the Soviet Union and the transition from a planned to a market-driven economy, Russian business has been steadily on the rise since 1999. High prices for oil, natural gas and metals, Russia's main export items, helped the domestic economy recover from the financial collapse of 1998, which resulted in a deep devaluation of the national currency, the ruble.
Between 2000 and 2008, Russia experienced a period of unprecedented economic growth. Significantly fueled by energy export revenues, real GDP grew by 7% on average between 2000 and 2007.1 Russia was able to pay off a large part of its foreign debt ahead of schedule,2 and as of July 2008, it had accumulated over $ 592.3 billion in international reserves.3 Foreign trade gains translated into a surge in domestic consumption and investment.4 The RTS, a Russian stock market index, rose nearly 700% between 2002 and 2007.5 Average wages rose from $139 per month in 2002 to $753 in June 2008.6 The private sector led by the oil industry was the source of the stellar growth of the Russian economy during this period.
However, in 2003 the government started renationalizing some strategic sectors by taking control of assets, and placing them in the control of state-owned entities or of individuals with close ties to the Kremlin. The oil industry was extensively affected by renationalization, Rosneft's seizure of Yukos being the biggest and most notirious of them. Heavy machinery, aircraft and banking industries also had their share of the process of renationalization.7 Driven by the interests of state officials looking to extend their power and wealth, renationalization reduced economic efficiency of the companies in the state hands resulting in a sharp fall of the country's economic growth rate.8
Issue 13/14: Summer/Fall 2008
Guide to Russian Business Information Resources
Table of Contents
Business & Economy
Foreign Trade & Investments
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Lumber Industry, Tobolsk, Russia (Federation). 1912.
Sergei Mikhailovich Prokudin-Gorskii, 1863-1944,
Forms part of: Prokudin-Gorskii Collection
Library of Congress
Prints and Photographs Division
Reproduction Number: LC-DIG-prokc-20755
In addition, Russia was hit hard by the world economic crisis of 2008-09. The country's GDP shrank by almost 8 percent in 2009, while the RTS stock index plunged by about 80 percent from its peak of around 2,500 points.9 The country had to spend more than one-third of its foreign currency reserves to support the ruble and jump-start the economy. Driven by strong private consumption growth, the economy expanded considerably in 2011. Real GDP rose by 4.3%, the same rate as in 2010, but well below rates before the recession of 2009.10
The economic slump highlighted fundamental flaws in the Russian economic system. Despite the impressive growth of the previous 10 years, Russia's economy remains lopsided and extremely dependent on energy exports. The country's business environment is infamous for its weak rule of law, rampant corruption and red tape.11 In 2012 Russia was ranked 120th out of 183 economies by the World Bank for ease of doing business.12 Security of property rights is contingent on political connections. Many Russian regions remain underdeveloped with deteriorating infrastructure. Labor productivity in most sectors of the economy, and living standards of the majority of the Russian population are still well below those in developed countries. High prices for Russia's exports helped the country's economy recover from the 2008-09 crisis, but economists point to the need for deep structural reform to generate further growth.
1.Elena Sharipova and Katya Malofeeva. "Russia's Economic Growth: Navigating Storms," in Update: Economic and Political Research. Renaissance Capital, July 14, 2008 (published July 21, 2008). pp. 5-8, as viewed in the ISI Emerging Markets subscription database on August 18, 2008. Access limited to patrons on-site and other subscribers.
2.Russia. (Federation) Central Bank. Banking Supervision Report. 2006. p.8, p.15.
http://www.cbr.ru/eng/publ/root_get_blob.asp?doc_id=7449 [PDF Format: 891 KB / 101p.]
3. Russia & CIS Business & Investment. Interfax. August 16, 2008. As viewed in the ISI Emerging Markets subscription database on August 18, 2008. Access limited to patrons on-site and other subscribers.
4.Elena Sharipova and Katya Malofeeva, "Russia's Economic Growth: Navigating Storms," in Update: Economic and Political Research. Renaissance Capital, July 14, 2008 (published July 21, 2008). p.6, as viewed in the ISI Emerging Markets subscription database on August 18, 2008. Access limited to patrons on-site and other subscribers.
5. RTS Index. p.3
http://fs.rts.ru/files/4446/indexrts-eng-2008.pdf [PDF Format: 413 KB/ 20p.]
6. Economic and Political Update, Renaissance Capital. August 11, 2008. pp. 19-20, as viewed in the ISI Emerging Markets subscription database on August 18, 2008. Access limited to patrons on-site and other subscribers. [Original source identified as Rosstat, Central Bank of Russia. Ministry of Finance, Renaissance Capital estimates]
7. Anders Åslund, "The Folly of Renationalization," Peterson Institute for International Economics, Op-ed in the Moscow Times, May 23, 2006. http://www.piie.com/publications/opeds/oped.cfm?ResearchID=637. Viewed on July 12, 2012.
8. Anders Åslund, "Let's Get Privatization Right This Time Around,." Peterson Institute for International Economics, Op-ed in the Moscow Times. August 18, 2010. http://www.piie.com/publications/opeds/oped.cfm?ResearchID=1640. Viewed on July 12, 2012.
9. Anders Åslund, Sergei Guriev, and Andrew C. Kuchins, eds., Russia after the Global Economic Crisis, (Washington, DC : Peterson Institute for International Economics : Center for Strategic and International Studies; Moscow : New Economic School, 2010.)
10. Economist Intelligence Unit. "EIU Country report". May 2012. p. 7, as viewed in the EIU Country Reports database on June 6, 2012. Access limited to patrons on-site and other subscribers.
Timothy Frye, "Corruption and Rule of Law" in Russia after the Global Economic Crisis, eds. Anders Åslund, Sergei Guriev, and Andrew C. Kuchins, (Washington, DC : Peterson Institute for International Economics : Center for Strategic and International Studies; Moscow : New Economic School, 2010.), 79-94.
12. World Bank. "Doing Business: Measuring Business Regulations". 2012. http://www.doingbusiness.org/data/exploreeconomies/russia Viewed: July 12, 2012.
Last Updated: March 2012 To view PDFs